Feeling Pressured by a Counterpart? Try Deal Structuring with Conditions

A careful eye toward deal structuring can turn a less than ideal request into a more palatable deal by imposing conditions to an agreement.

By — on / Leadership Skills

deal structuring

Your boss asks you to disrupt some family plans to work through the weekend. The PTA president at your children’s school wants you to chair an important benefit that no one else will lead. A customer asks you to participate in an auction rather than negotiating one-on-one for his contract. Being asked to do something we don’t want to do is an unfortunate fact of life. With the right deal structuring, you can find something that works for everyone.

Former Congressman Paul Ryan found himself in such a pressure-filled situation in 2015, when his fellow Republican Party members urged him to run for the position of Speaker of the House of Representatives.

We tend to respond to such pressure either with a flat-out refusal that bruises the relationship or a grudging yes that can leave us feeling unappreciated and angry. Often, there is a better choice: By stipulating conditions to negotiating or reaching a deal, as Ryan did, we can make our response to a request more palatable both to ourselves and the other party, whether it ends in a yes or a no.

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Creative deal structuring to move from “no” to “maybe” to “yes”

With House Republicans facing a leadership crisis following John Boehner’s announcement that he would retire from the Speaker of the House post by the end of October 2015, Ryan was widely perceived as the only candidate capable of garnering enough votes to lead and unite the party’s fractious caucus.

But there was a problem: Having just assumed a long-coveted position as chair of the House Ways and Means Committee in January 2015, Ryan repeatedly said he did not want the job. The often-thankless position, he knew, would be made more onerous by tough fiscal deadlines and election-year politics. Yet Ryan’s fellow Republicans courted him relentlessly, appealing to his sense of duty. In his absence, they feared, a slew of unelectable candidates would vie for the position and make a public spectacle of the party’s turmoil.

Ryan’s resolve began to waver. But rather than simply caving, he arranged a meeting with other Republican House members on October 20. He said he had concluded that the party was facing a “dire moment,” according to the Atlantic. He feared that if he didn’t run, his children might one day ask him, “Why didn’t you do all you could?”

“I hope this doesn’t sound conditional—but it is,” Ryan told party members at the meeting, according to the Washington Post. He took advantage of deal structuring to lay out three clear conditions that would have to be met for him to agree to run for Speaker:

  1. The three major Republican House factions—including the Freedom Caucus, which was tepid about Ryan’s candidacy—would have to unite behind him by the end of the week.
  2. To avoid the power struggles and threats that Boehner had anticipated facing if he’d remained Speaker, Ryan asked for support to overturn a rule allowing a simple majority of the House to remove a sitting Speaker.
  3. Ryan would insist on delegating the traditional travel and fund-raising duties of the House Speaker to leave his weekends free for his family. “I cannot and will not give up my family time,” he said. (For more on this condition, see the sidebar below, “Paul Ryan Takes on the ‘Flexibility Stigma.’”) In return, he said, he would spend more time communicating the party’s message.

As part of his deal structuring, Ryan also said he would be willing to consider changes to House rules proposed by the Freedom Caucus that would weaken the Speaker’s power; however, he said he would not treat these requests as conditions to running.

Republicans readily agreed to meet Ryan’s condition about not working on weekends and to back his desired rule change in the House. The day after the meeting, a solid majority of the Freedom Caucus voted to support Ryan, effectively ensuring Ryan’s condition of party unity, given that the backing of the other two factions was already guaranteed. On October 28, all but nine of Ryan’s Republican colleagues voted to elect him Speaker, and he easily defeated the Democrats’ candidate, House Minority Leader Nancy Pelosi.

“The future looks brighter,” said House Majority Leader Kevin McCarthy (who had led a failed campaign to become Speaker himself), according to the Washington Post, reflecting the relief felt by many Republicans. “The whole conference is more united,” McCarthy continued. “And when we’re united, we can accomplish big things.”

Using deal structuring to change the game

Rather craftily, Ryan used conditions, an often-overlooked deal structuring technique, to help make the speakership tolerable to him. A condition is an “if” statement—“If you rally behind me, I’ll run for Speaker,” or “I’ll work through the weekend if you can give me two paid days off next month”—that qualifies your entry into a negotiation or acceptance of a deal. Though conditions can be used in most negotiations, they can be a particularly useful tool when it comes to improving the appeal of another party’s onerous request or demand.

Harvard Business School and Harvard Law School professor Guhan Subramanian has identified four types of conditions that can serve us well in negotiations:

  1. Conditions to entering talks. Because your participation in a negotiation often has value, you can use that value to gain leverage by proposing conditions to entry. Imagine, for example, that a customer invites you to participate in an auction for a coveted contract. You might agree only if the customer meets certain conditions, such as limiting the number of participants and agreeing to negotiate terms other than price with the top bidders.
  2. Conditions to the deal. During negotiations, you can use conditions to improve the quality of the deal and stand firm when you’re being asked for too much. Ryan made the support of the main Republican factions a condition for agreeing to run for Speaker.
  3. Conditions built into the deal. Unlike a condition to the deal, a condition built into the deal guarantees agreement whether or not the condition is filled, explains Subramanian. For example, Ryan’s condition that he be granted weekends off with his family was a condition built into his deal with his fellow Republicans, as was his request that they support a rule change regarding removal of the Speaker.
  4. Conditions to closing. When a delay exists between agreement and the official closing of a deal, you might want to use conditions to reduce your exposure to risk. For example, home buyers often condition their purchase of a house on a satisfactory inspection or on their ability to secure financing and sell their current home, or both. Conditions to closing are common in mergers and acquisitions as well.

A condition often shifts the balance of power in a negotiation, turning your problem into a joint problem, notes Subramanian. Rather than putting himself in the vulnerable position of lobbying for votes, for example, Ryan “more or less dared members not to give” their support, the New York Times said. His move also put responsibility on the Freedom Caucus to approve his candidacy, lest it be blamed for prolonging the Republicans’ leadership woes in the House.

Issuing conditions successfully

When making a bold condition, you need to be prepared for the possibility that your counterpart will reject it. In Ryan’s case, he was aware that his party had a poor BATNA, or best alternative to a negotiated agreement: It had no other strong candidates for the Speaker position. Ryan, meanwhile, had an excellent BATNA: He actually preferred not to be Speaker. This power difference meant that Ryan had little to lose; he could issue creative conditions and insist they be met. You should strive to craft conditions that make the deal the other side is striving for more appealing than your BATNA. If you can’t, then saying no may be the best choice for you.

As this example suggests, conditions are generally an excellent deal structuring maneuver when you are negotiating from a position of strength. By contrast, when you are the less-powerful party or when power is more evenly balanced, demanding firm conditions can be riskier. For example, after the Minnesota Orchestra locked out its musicians during a 2012 dispute over wages, the musicians said they would negotiate only if management ended the lockout, resumed the season, and began paying them again. The orchestra’s management refused to meet this condition for fear of losing negotiating leverage. The dispute persisted for more than a year, in part because of the musicians’ firm conditions to negotiating.

Two key lessons emerge from these stories. First, just as you would only make a threat that you are ready to follow through on, you should only demand conditions that are truly deal breakers for you.

Second, try to craft conditions in ways that provide benefits or concessions to your counterpart, if possible. For example, Paul Ryan’s insistence on party unity offered clear benefits not only to him but also to House Republicans as a group. And in exchange for accepting the job only on the condition that he have weekends off to be with his family, he promised to spend more time communicating the party’s message, a valuable concession to his counterparts. Even when you have the power to get what you want from a negotiation, your efforts to help your counterparts get what they want will pay off in the form of stronger relationships and more lasting deals.

Paul Ryan takes on the “flexibility stigma”

Though many observers praised Representative Paul Ryan for negotiating to protect his time with his family, some called his stance hypocritical given that he had voted against federal policies on family leave during his time in the House. But Ryan’s condition regarding family time could contribute to positive shifts in the way that men manage their work-life balance.

Both men and women recognize that they face a “flexibility stigma” for negotiating or taking advantage of unconventional work arrangements, says Joan C. Williams, director of the Center for WorkLife Law at the University of California. Interestingly, men may face even greater penalties for negotiating for flexible hours and assignments than women do because their behavior violates traditional expectations of men working long hours at the office while their wives take care of the children.

That may explain why men typically don’t ask for or advertise extra time with their families, instead choosing to slip away from work for a school function or answer emails at home, according to Harvard University professor Claudia Goldin. Women, by contrast, are more likely to make use of official flexibility policies or negotiate for time away from the office.

By negotiating explicitly to make his family time sacred, Ryan may have helped reduce some of the stigma men face for asking for flexible work arrangements and opened up new negotiation possibilities in the workplace.

Have you found ways to use creative deal structuring to come to an agreement?

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